COCOA
After a mild rally yesterday, March Coffee is back inside Friday’s range down action. The market is inside a consolidation range that was established in December. Ivory Coast farmers interviewed by Reuters said yesterday that light rains and a morning fog Ivory Coast’s cocoa-growing regions should help the development of the mid-crop harvest. They added that moisture levels are low and that they need at least one abundant rainfall to help flowers and small pods grow properly. Exporters said bean quality was poor on last week’s deliveries. World Weather Service said scattered showers and thunderstorms were noted during the weekend from coastal areas of Ivory Coast through southern Ghana to southern Benin. Rainfall was mostly light to locally moderate. A few cocoa areas benefited from the moisture, but most production areas are farther north and not impacted. Additional showers and thunderstorms are expected to show up near the coast this week and the precipitation may advance a little farther to the north next week and increase in frequency. This is the time of year in which seasonal rains usually resume. Next week’s rain may be a little more meaningful. ICE certified stocks rose 33,354 bags yesterday to 1.410 million, the highest they had been since December 16. Stocks increased 146,932 ins six sessions.
COTTON
March Cotton rallied overnight after falling to new contract lows yesterday. The 30-day reprieve on the US tariffs against Mexico (and Canada) may have eased concerns about retaliation against US cotton exports. There may have also been some relief that China did not include cotton in its retaliation, focusing instead and in a mild way on US energy exports. The dollar is lower today after approaching the January (26-month) high yesterday, which also helps. Yesterday’s selloff may have also been the culmination of a selling trend that has been in place for four months. The market was oversold technically, and the fact that it closed higher yesterday after trading to new lows indicated shorts were eager to cover. China and Mexico have not been as important buyers of US cotton this year as they have in the past. China’s purchases of US cotton are only a fraction of what they were in previous years. This year their commitments have reached 693,000 bales versus 3.998 million last year at this time. Their current outstanding sales are 221,000 versus 1.862 million a year ago. Mexico’s commitments have reached 614,000 bales versus 732,000 a year ago and a five year average 842,000. Their outstanding sales are currently 352,000 bales versus 371,00 a year ago and 459,000 on average. At some point the US cotton market may feel the need to bid for acres. Brazil led the US in production and exports last year. Cotton planting in Mato Grosso, Brazil was only 33.5% complete as of January 26 versus 75.2% a year ago.
SUGAR
March Sugar is consolidating inside a six-day range. The market rallied the week before last on concerns over the US crop, but another supportive factor could be that Brazilian mills have shifted more of the cane crushing activity towards ethanol and away from sugar. As of January 16, Brazilian 2024/25 sugar production was down 5.5% from a year ago but ethanol production was up 3.2%. For the first half of January, sugar production was down 79% from the previous year and ethanol production was up 16%. This may be a reaction to low sugar prices, but the trend to more ethanol could lend support for another leg up. The Brazilian real has gained against the dollar over the past couple of weeks and has reached its highest level since November. This lowers pressure on Brazilian mills to sell. Brazil’s rainy season has improved the outlook for 2025/26 cane crop.
COFFEE
March Coffee is trading in the upper end of yesterday’s range after making new all-time highs for the eighth session in a row yesterday. Comexim, one of the five largest exporters of Brazilian coffee, projected yesterday that Brazil’s 2025/26 coffee crop would total 63.2 million bags, down 1.8% from 2024. They put robusta production at 23.3 million bags, up 24% from 2024 and arabica at 39.9 million, down 12%. Recall that last week, Conab put Brazil’s 2025/26 production at 51.8 million bags, down 4.4% from 2024/25, with robusta production up 17.2% at 17.1 million bags and arabica production down 12.4% at 34.7 million. The two groups are united on their assessment of the arabica crop, but one is more optimistic about robusta. World Weather Service expects precipitation in Brazil’s arabica production areas to diminish this week after abundant rainfall over the weekend. Temperatures are expected to be a little warmer as more sunshine appears and relative humidity decreases but some of the drying will be welcome. ICE certified arabica stocks fell 11,405 bags yesterday to 856,177, their lowest since November 12. Stocks have declined 71,473 in four sessions. The number of bags pending review increased by 32,687 to 124,862, their highest since October 29. They have increased 119,248 bags in four sessions.
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